Publication: Monitor Volume: 7 Issue: 157

A trio of recent developments has put the practices and prospects of Russia’s arms exports back in the spotlight. These include the publication earlier this month of a U.S. congressional study with new international arms sales figures, the holding of a Russian-sponsored international airshow near Moscow, and new reports suggesting that Moscow and Tehran may be on the verge of signing a fresh package of arms sale agreements. All three developments appear to suggest that the more aggressive export policy Russia’s arms exporters have undertaken under President Vladimir Putin is beginning to pay dividends. Arms sales for the year 2000 appear to have been up, and key Russian defense officials have been enthusiastic about the country’s prospects in this area over the next several years. There remain more than a few flies in the ointment, however. It also remains to be seen both whether the figures currently being bandied about reflect reality and whether Russia’s current pace of arms sales is sustainable. Another unanswered question, one crucial to the sustainability issue, is whether Russia’s arms export establishment will achieve its goal of diversifying the country’s current client base. Success in sustaining high levels of arms exports is critical to Russia because it currently lacks the financial wherewithal to make meaningful purchases from–or significant investments in–its struggling defense industrial sector. The sector’s survival, therefore, not to mention the government’s hopes of being able to reequip what it intends to be a leaner but more efficient armed forces over the next decade, could depend to an important degree on the arms industry’s success in raising revenues from abroad.

The claim that Russia is meeting with increasing success on the international arms market appears to be borne out by the U.S. Congressional Research Service’s recently published annual report on conventional arms transfers. Written once again this year by defense expert Richard Grimmett, the study placed Russia second–albeit a distant second–to the United States with regard to the value of arms contracts signed on the world market in 2000. In a year when overall international arms sales reportedly rose about 8 percent, U.S. arms manufacturers signed contracts for just under US$18.6 billion, about half of all weapons sold on the world market last year, while Russian companies inked contracts of their own worth about US$7.7 billion. The Russian figure was up considerably over the reported US$4.1 billion for 1999. Of the total US$36.9 billion in international arms purchases made last year, US$25.4 billion involved sales to developing countries–the highest total since 1994. The Congressional Research Service study also tracked the value of actual weapons deliveries last year–as opposed to the value of contracts signed. The United States also led in this category, with reported sales of US$8.7 billion. Russia fell to third, coming in behind both the United States and Britain (New York Times News Service, August 21; Reuters, August 20; AP, August 21).

The statements of Russian arms officials gathered for the Zhukovsky air show near Moscow this month appeared to corroborate the Congressional Research Service study’s suggestion that Russian arms exports are on the rise. According to Sergei Chemezov, senior deputy general director of the Russian state arms trading company Rosoboroneksport, his company has already signed US$6.5 billion in arms contracts since Rosoboroneksport came into existence just last November. The company’s total contracts portfolio is valued at close to US$13 billion, Chemezov said, and another US$2 billion worth of contracts is pending. Chemezov, who some reports say will soon replace Andrei Belianinov as chief executive of Rosoboroneksport, also claimed that the company expects to export military hardware worth about US$3.2 billion this year, and that its arms contracts have already earned US$2.8 billion in revenues so far in 2001. Rosoboroneksport was created late last year as part of a Kremlin-ordered consolidation effort within Russia’s arms export establishment. As the country’s only state arms trading company it handles the bulk–though not all–of Russia’s arms export deals (Vremya MN, Nezavisimaya Gazeta, August 16).

One weakness of Russia’s arms export policy has been its failure to diversify the country’s client base, and it is Moscow’s effort to remedy this situation that could bring it into conflict with Washington. To date, Russia’s post-Soviet arms trading has been dominated by sales to two customers–China and India. But the Kremlin appears more recently to have targeted Iran as a prospective new market, and negotiations between the two countries on a package of arms deals are believed to be progressing steadily. Indeed, the Congressional Research Service study highlighted both an increased flow of Russian arms to Iran–Moscow reportedly delivered US$800 million to Iran between 1997 and 2000–and the growing possibility that Moscow and Tehran will eventually conclude new arms agreements.

That this could happen sooner rather than later was suggested by Deputy Defense Minister Mikhail Dmitriev, another top Russian arms official. Dmitriev, who was appointed to his post earlier this year as part of the reshuffle that accompanied the naming of Sergei Ivanov as defense minister, told reporters on August 24 that the Russian and Iranian governments were expected in the near future to sign a framework agreement on military-technical cooperation. Dmitriev provided no details, but did say that a draft of the agreement was being examined by the Russian government (Interfax, August 24). In an interview with the main military journal Krasnaya Zvezda on August 28, moreover, Dmitriev suggested that Moscow was already looking at the Russian-Iranian agreement as a potential breakthrough for Russia’s arms exporters. He said that a contract for the sale of more than 500 armored personnel carriers has already been readied for signing and that the two countries are discussing a host of other potential arms sales–from anti-aircraft systems to military aircraft (Krasnaya Zvezda, August 28).

But is Moscow really making significant progress on the arms export front? Some analysts appear to have their doubts. A report in Kommersant, for example, points to barter arrangements and other unorthodox payment schemes still prevalent in Russian arms deals–not to mention the fact that some companies in this sector still fail to provide official or reliable arms sales figures–to suggest that a recent rating of Russian defense companies in a respected U.S. defense publication may be suspect (Kommersant, August 14). Other critics offer a more blanket condemnation of current Russian arms sales policies. A report of the Zhukovsky air show, for example, included the assertion that the show in fact amounted to little more than a desperate fire sale of Russian aviation technology, one conducted in hopes of raising enough revenue to keep at least some leading Russian aircraft makers–or a favored weapons development program–afloat. Indeed, the respected Russian military analyst Pavel Felgenhauer warned that the ranks of gleaming fighter planes and other aircraft lined up on Zhukovsky field were in fact little more than repainted Soviet-era jobs that are likely to disappoint any customer who takes a closer look. “Russia has long since lost its technological edge,” he was quoted by as saying. “The truth is that Russia’s military industry is incapable any longer of building complete weapons systems. They may sign contracts and take the money, but they can’t deliver” (The Independent, August 17).